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TEHO INTERNATIONAL INC LTD Annual Report 2012 37
Notes to the
Financial Statements
30 June 2012
2. Summary of Signifcant Accounting Policies (Continued)
Impairment of Non-Financial Assets
Irrespective of whether there is any indication of impairment, an annual impairment
test is performed at the same time every year on an intangible asset with an indefinite
useful life or an intangible asset not yet available for use. The carrying amount of other
non-financial assets is reviewed at each end of the reporting year for indications of
impairment and where an asset is impaired, it is written down through profit or loss to
its estimated recoverable amount. The impairment loss is the excess of the carrying
amount over the recoverable amount and is recognised in profit or loss. The recoverable
amount of an asset or a cash-generating unit is the higher of its fair value less costs
to sell and its value in use. When the fair value less costs to sell method is used, any
available recent market transactions are taken into consideration. When the value in
use method is adopted, in assessing the value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). At each end of the
reporting year non-financial assets other than goodwill with impairment loss recognised
in prior periods are assessed for possible reversal of the impairment. An impairment
loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
Inventories
Inventories are measured at the lower of cost (first in first out method) and net realisable
value. Net realisable value is the estimated selling price in the ordinary course of business
less the estimated costs of completion and the estimated costs necessary to make the
sale. A write down on cost is made for where the cost is not recoverable or if the selling
prices have declined. Cost includes all costs of purchase, costs of conversion and other
costs incurred in bringing the inventories to their present location and condition.
Financial Assets
Initial recognition, measurement and derecognition:
A financial asset is recognised on the statement of financial position when, and only
when, the entity becomes a party to the contractual provisions of the instrument. The
initial recognition of financial assets is at fair value normally represented by the transaction
price. The transaction price for financial asset not classified at fair value through profit
or loss includes the transaction costs that are directly attributable to the acquisition or
issue of the financial asset. Transaction costs incurred on the acquisition or issue of
financial assets classified at fair value through profit or loss are expensed immediately.
The transactions are recorded at the trade date.
2. Summary of Signifcant Accounting Policies (Continued)
Financial Assets (Continued)
Irrespective of the legal form of the transactions performed, financial assets are
derecognised when they pass the “substance over form” based on the derecognition
test prescribed by FRS 39 relating to the transfer of risks and rewards of ownership and
the transfer of control.
Subsequent measurement:
Subsequent measurement based on the classification of the financial assets in one of
the following four categories under FRS 39 is as follows:
1. Financial assets at fair value through profit or loss: As at end of the reporting year
date there were no financial assets classified in this category.
2. Loans and receivables: Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in an active market.
Assets that are for sale immediately or in the near term are not classified in this
category. These assets are carried at amortised costs using the effective interest
method (except that short-duration receivables with no stated interest rate
are normally measured at original invoice amount unless the effect of imputing
interest would be significant) minus any reduction (directly or through the use of
an allowance account) for impairment or uncollectibility. Impairment charges are
provided only when there is objective evidence that an impairment loss has been
incurred as a result of one or more events that occurred after the initial recognition
of the asset (a ‘loss event’) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial assets that
can be reliably estimated. The methodology ensures that an impairment loss is
not recognised on the initial recognition of an asset. Losses expected as a result
of future events, no matter how likely, are not recognised. For impairment, the
carrying amount of the asset is reduced through use of an allowance account. The
amount of the loss is recognised in profit or loss. An impairment loss is reversed
if the reversal can be related objectively to an event occurring after the impairment
loss was recognised. Typically the trade and other receivables are classified in this
category.
3. Held-to-maturity financial assets: As at end of the reporting year date there were
no financial assets classified in this category.
4. Available-for-sale financial assets: As at end of the reporting year date there were
no financial assets classified in this category.